How much will it cost? Calculate your home loan repayments

Media Release

RBA Survey: Smaller banks likely to be the winners from Open Banking – April, 2018

The Reserve Bank met today and left the cash rate unchanged at 1.50%

Most panellists (73%) think Open Banking will benefit smaller banks more than the Big Four

39% of experts think the Royal Commission may diminish trust among large financial institutions

3 April, 2018, Sydney, Australia – Key events in the financial services sector including Open Banking and the Royal Commission will favour smaller banks over the Big Four, according to exclusive research commissioned by finder.com.au.

This afternoon the Reserve Bank of Australia (RBA) met to discuss monetary policy, and left the cash rate at 1.5% — a decision accurately predicted by all but one member (31/32, 97%) from the finder.com.au RBA survey.

This represents the eighteenth consecutive decision to hold from the board of the RBA.

Eight panellists who gave rate forecasts are expecting the cash rate to shift upwards this year.

Interestingly, four experts and economists believe the Reserve Bank will cut the cash rate this year, three of which are predicting a cut in August.

Panellists were asked if data transparency brought about via Open Banking will benefit smaller lenders in Australia more than the Big Four.

Seventy-three percent (11/15) of those who weighed in said Open Banking will favour smaller banks more than it will favour larger financial institutions.

Graham Cooke, Insights Manager at finder.com.au, says Open Banking should drive innovation within the sector.

“It [open banking] should foster competition and promote innovation as banks will be forced to provide a higher level of service to retain and attract customers.

“Switching may become more frequent and we may see customers move away from the larger banks and towards smaller players like credit unions and online lenders.

“More generally, the availability of rich consumer data could lead to the development of smarter and more sophisticated apps to help consumers compare banks,” he says.

The survey asked respondents, “Do you think the Banking Royal Commission is eroding trust in the Big Four, to such a degree that Aussies will increasingly turn to smaller banks and lenders?”

The majority (61%) don’t think the Royal Commission is eroding trust among the Big Four, while 39% (7/18) believe it may erode trust to a point that consumers will refinance to smaller providers.

“As with Open Banking, the Royal Commission will create greater transparency and potentially expose unsavoury practices of certain banks which could hurt their bottom line.

“Misconduct by household names will greatly diminish confidence within the financial services sector, and some Australians may move accounts to smaller lenders if they think larger companies have lost their moral compass,” Mr Cooke says.

Here’s what our experts had to say:

Jordan Eliseo, ABC Bullion (Hold): "The RBA will continue with their current monetary policy settings, though recent data will have dented their confidence regarding the outlook for employment, inflation and overall economic growth. We remain of the view that their next move will be a cut to the cash rate, particularly if house price weakness continues, but this will take time to play out."

Shane Oliver, AMP Capital (Hold): "High business confidence, strong jobs growth and the RBA's own growth and inflation forecasts argue against a rate cut, but risks around consumer spending, weak wages growth and inflation, the slowing Sydney and Melbourne property markets and the still too high $A argue against a rate hike."

Alison Booth, ANU (Hold): "The fundamentals don’t want any change."

John hewson, ANU (Hold): "[The RBA] simply can't move given level of household debt. The economy is still mixed."

Paul Dales, Capital Economics (Hold): "There are still no real signs that inflation is heading back up to the middle of the 2-3% target range, so interest rates need to stay low to give it a bit of a boost."

Saul Eslake, Corinna Economic Advisory (Hold): "Nothing has materially changed since the RBA last stated that current monetary policy settings were (in its opinion) appropriate. There’s been no new data on price or wage inflation; and the most recent labour force data suggests that the margin of spare capacity in the labour market remains unchanged, despite ongoing strong employment growth (because most of the new jobs are going to new entrants to the labour force). And the RBA has repeatedly made it clear that it feels under no pressure to follow other central banks in hiking rates."

Mark Brimble, Griffith University (Hold): "Volatility and uncertainty are key factors in the global context and the Australian economy continues to show lackluster performance."

Shane Garrett, Housing Industry Association (Hold): "The current economic environment of strong job creation and fairly weak price pressures does not merit a change in monetary policy from the RBA at this time."

Alex Joiner , IFM Investors (Hold): "There is no material change in the outlook. The labour market continues to perform well however economic activity nor consumer price/wages inflation justifies a near term adjustment of policy."

Michael Witts, ING (Hold): "The RBA will keep rates unchanged as it is looking for the economy to gather further momentum."

Leanne Pilkington, Laing+Simmons (Hold): “The residential housing market, and the economy generally, requires the steady interest rate environment to continue. Employment growth has been encouraging but tempered by flattened wage growth, while house price growth is also subdued and clearance rates are solid if unspectacular. It amounts to a prudent case of the RBA leaving rates as is."

Nicholas Gruen, Lateral Economics (Hold): "The economy has spare capacity and the bank doesn't want to cut – even though for a long time it should have."

Mathew Tiller, LJ Hooker (Hold): "The global economy has continued to show signs of improvement, despite ongoing geopolitical uncertainty. In Australia, the economy remains on a steady footing with business confidence and employment improving. However, this is yet to flow through the increased wages or consumer prices. Housing markets across the country continue to remain active with listings numbers increasing and auction clearance rates sitting just below the long-term average. More properties on the market for sale has provided more choice for buyers and when combined with the moderation of investor demand has led to a slowdown in price growth. In weighing up these variables, it is likely that the RBA will keep the cash rate at the record low of 1.50% over the short-term."

Marie Mortimer, loans.com.au (Hold): "We are speaking to a lot of borrowers who are refinancing with loans.com.au for a cheaper rate than traditional lenders because they are conscious of their household budget. The RBA are also aware of the impact on a rate rise to household budgets and we believe that rates will remain on hold in the short term due to the relatively low inflation rate and weak economic sentiment."

Stephen Koukoulas, Market Economics (Hold): "The RBA is unable to get away from its obsession with non-existent financial instability. It should be cutting rates"

John Caelli, ME (Hold): "The RBA has flagged they are in no hurry in increasing rates. They want to see inflation increase, a pick-up in wages and lower unemployment before they consider putting up rates again."

Michael Yardney, Metropole (Hold): "Despite an increasing divergence with overseas rates, the RBA will keep official rates at their historic low of 1.5% because of spare capacity in our employment markets. While the Australian economy added 17,500 jobs in February, strong population growth and increased labour-force participation meant the official unemployment rate crept up a notch from 5.5% to 5.6%."

Mark Crosby, Monash University (Increase): "Despite ‘The Donald’s’ attempts to trash the world economy, the case for the RBA raising is now very strong."

Christopher Schade, MyState (Hold): "With wages growth subdued and inflation well contained; there is no need for the RBA to rush to raise rates. We would not be surprised to see the RBA on hold for much, if not all of CY 2018."

Alan Oster, nab (Hold): "No increase until we get better wages and more consumer activity."

Jonathan Chancellor, Property Observer (Hold): "More time and confidence is needed before any rate rise."

Christine Williams, Smarter Property Investing (Hold): "Unemployment figures have reduced slightly across most states, however individual debt has increased per capita. Banks are continuing to tighten their policy to be in line with responsible lending with owner occupier and investment property loans, thus reducing their overall risk in the property segment."

Besa Deda, St George Bank (Hold): “The inflation outlook does not warrant a near term rate increase from the RBA.”

Brian Parker, Sunsuper (Hold): "Labour market and inflation developments aren't robust enough to warrant any near term tightening, and the RBA is clearly unwilling to ease to boost growth. On hold for a long time!"

For further information

The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.

About us

More than 3 million Australians turn to finder.com.au every month to save money, time and make important life choices. We compare virtually everything from credit cards, phone plans, health insurance, travel deals and much more.

Our free service is 100% independently-owned by two Australians: Fred Schebesta and Frank Restuccia. Since launching in 2006, we’ve helped our users make more than 17 million decisions.

We continue to expand and launch around the globe, and now operate in the United States and United Kingdom. For further information visit www.finder.com.au.

Disclaimer - Hive Empire Pty Ltd (trading as finder.com.au, ABN: 18 118 785 121) provides factual information, general advice and services on financial products as a Corporate Authorised Representative (432664) of Advice Evolution Pty Ltd AFSL 342880. Please refer to our FSG - Financial Products. We also provide general advice on credit products under our own Credit Licence ACL 385509. Please refer to our Credit Guide for more information. We can also provide you with general advice and factual information on about a range of other products, services and providers. We are also a Corporate Authorised Representative of Countrywide Tolstrup Financial Services Group Pty Ltd. ABN 51 586 953 292 AFSL 244436 for the provision of general insurance products. Please refer to our FSG - General Insurance. We hope that the information and general advice we can provide will help you make a more informed decision. We are not owned by any Bank or Insurer and we are not a product issuer or a credit provider. Although we cover a wide range of products, providers and services we don't cover every product, provider or service available in the market so there may be other options available to you. We also don't recommend specific products, services or providers. If you decide to apply for a product or service through our website you will be dealing directly with the provider of that product or service and not with us. We endeavour to ensure that the information on this site is current and accurate but you should confirm any information with the product or service provider and read the information they can provide. If you are unsure you should get independent advice before you apply for any product or commit to any plan. (c) 2018.

Thank you for your feedback.

Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.

Important information about this website

finder.com.au is one of Australia's leading comparison websites. We compare from a wide set of major banks, insurers and product issuers.

finder.com.au has access to track details from the product issuers listed on our sites. Although we provide information on the products offered by a wide range of issuers, we don't cover every available product. You should consider whether the products featured on our site are appropriate for your needs and seek independent advice if you have any questions.

Products marked as 'Promoted' or "Advertisement" are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options and find the best option for you.

The identification of a group of products, as 'Top' or 'Best' is a reflection of user preferences based on current website data. On a regular basis, analytics drive the creation of a list of popular products. Where these products are grouped, they appear in no particular order.

Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment.

We try to take an open and transparent approach and provide a broad based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.

Some product issuers may provide products or offer services through multiple brands, associated companies or different labelling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.

Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider's terms and conditions as well as their application and lending criteria.

Please read our website terms of use for more information about our services and our approach to privacy.